We all need an employee that will be there for us for many years, through thick and thin. Even better is an employee that can directly help us make more money, and perhaps someday do all the work for us while we focus on other things! The ultimate: the employee won’t ever talk to you, and can be monitored at all times. The last point was for you controlling types 🙂
That employee is money! When somebody says “I want my money to work for me”, it sounds like they’re at least on the right rack with intent. We can work hard all our lives, and save money without thinking of it as anything more than just that: savings. It’s a simple approach, but one that can really be costing us. Stuffing cash under the mattress is still saving, but if it’s not compounding then it’s losing purchasing value in the absence of deflation.
Maybe one way to look at it is that you’re the CEO, and you can’t accomplish your goals by yourself. You need help, and you need the right mix of employees to help you get where you need to be with your business. Then, your business can reach its goals and you can bask in the glory of that success!
But first, you need to assemble that team of employees. In the case of personal finance, those “employees” are like investments and asset classes. Here are some things to consider:
- Don’t hire employees who all have the same skills and background. No business would do that, right? Just as a business needs some diversity in experiences, you’ll need to diversify your portfolio. In other words, using this analogy with your money, don’t pull all your eggs in one basket. Rather, practice effective asset allocation.
- Look at their work history. Just as a CEO would take a close look at a potential key new hire’s background in order to gauge potential future success, you need to look at the resume of your financial “employee” For example, if you’re looking at making an investment, analyze it to see if it’s a good fit for your portfolio. In other words, do your homework when making investment choices.
- Hire for the right business cycle. If a business is in growth mode, it can pay to take on some higher risk employees who might be fresh, full of energy and new ideas. If a business is more mature, not in all out growth mode, and has stockholders or Wall Street to placate, it might get more conservative with its hires. In other words, translating this to your investments, take more risks when starting out, and fewer risks when closer to retirement.
You get the analogy here. Just like a business leader assembles the right talent to reach success while managing risks, each can do the same with our money by managing it in a way that entails investing wisely.
Ultimately, the more we put money to work for us and the more effective we are at getting it to work hard, the less we have to work going forward. If a person had $100k earning 5%, that’s $5k per year. If that same person had $1 million earning 8%, that’s $80k per year and much less pressure on us. Which is great, because money is an employee that doesn’t feel pressure 🙂
Do you ever think about how hard your money is really working for you?
I love this! My husband and I say to each other all the time that we need to get our money working hard for us so the we don’t have to work so hard for our money! We are working on doing just that!
Totally know what you mean, it seems like it would be great to turn the tables.
Awesome points. I never thought of the “hire different skills and backgrounds” idea. I think it’s easy to find a safe bet and work to replicate it over and over again. But you’re right, eventually you need some diversity.
Thanks!
Interesting analogy Ray! Businesses also spend a great deal of time on cost control and looking at the most efficient use of capital. We could all improve our finances by using these strategies.
Thanks Paul – we can learn a lot from business, and apply it to our own lives.
I do. I often think as how bad I’ve treated my money ah employees over the years. 🙂 I’ve looking forward to the future after debt repayment to make the most of my employees.
There you go, good approach. Get rid of that debt and then play ball with the “employees”!
This is an interesting perspective, Ray! I wish my money worked harder for me too 🙂
Here’s hoping you can get your money to work harder for you!
I’ve been trying to put my cash to use this year. I was sitting on too much cash for a while because I didn’t know what to do with it. I’ve been investing it into a mix of funds and stocks finally so that I can get a better return that the pathetic interest rate at the bank.
Well, if stocks perform anywhere near historical averages, that would beat the interest rates you might otherwise get! Just have to hope there isn’t a huge correction.
I certainly love this analogy. Make money work for you is a phrase I hear quite often and use it myself but hadn’t crystalized my strategy yet. Money is a great employee, put it to work and it will do it tirelessly with minimal supervision. Your work will be to move it around to where it will have maximum effect on your bottom line (awesome!)
Am looking at that point where my money will be working & producing more that I currently do 🙂
Make sure to live a well-rounded life. Feel free to reap some of the fruits of your labor. If you scrimp and save too much, you may explode. That’s bad for business. Consider pocketing the dividends, for instance. Use that money for play if you’d like.
you say things